What use should the public sector have for the private sector?

Here are the slides from my recent All Souls Lecture on privatisation:

The Big Issue

• The big issue of public / private partnership, contracting out and privatization is back on the agenda.
• The government needs to clarify the role it sees for the private sector and make the case for why it needs private involvement in the public services.
• The public sector under both Labour and Conservative make extensive use of the private sectors as
• Supplier of goods and services to public service
• As adviser
• As financier of public provision
• As provider of public services

Ten Types of public service

• Public sector monopolies employing public sector staff using public sector assets, providing the service free at the point of use. This is some people’s idea of a public service in general but is a limited case. The nuclear deterrent and the army are two good examples.

• Private sector companies competing to supply good or services, using private sector assets, employing private sector staff and charging the customers. This is the most normal form of public service in the UK for the supply of everything from bread to medicines over the counter.

Ten Types of public service

These are the main eight hybrid types:

• Public sector monopolies employing public staff and assets that charge the end users the cost and a mark up – planning departments, the grant of a variety of licences, the BBC etc.

• Public sector monopolies that employ private sector staff and assets to provide a free service – this would be a contracted out service like domestic refuse collection.

• Public sector monopolies employing private sector staff and assets and charging the end user – not common, but could include a local monopoly leisure facility or toll bridge for example.

Ten Types of public service
• Competitive services provided free by the public sector with choice to the end user using public sector staff and assets – schools etc.
• Competitive services provided free by the public sector using private sector staff and assets – the GP service.
• Competitive services provided by the public sector but charging the end user – e.g. public sector leisure facilities.
• Private sector monopolies using private sector staff and assets and charging the end user – these are rare but include regional domestic water monopolies.
• Private sector competitive businesses employing private sector staff and assets that do not charge the end user – free newspapers, free to air commercial TV etc.

Privatisation

Privatisation describes a range of different policies. There are two possible main ingredients:

1. Transfer of assets and risks from public sector to private, as with the sale of trading companies like the water business or BT.

2. Introduction of competition into former public sector monopolies, as with the licencing of competitors to BT and to British Rail trains.

In order to qualify as a privatisation there does have to be a genuine and substantial transfer of risk from public to private.

There is usually money passing from the private sector to the public when they buy the assets, but you can have privatisations for negative consideration where the assets and business are heavily lossmaking.

It is best when privatizing to break monopolies, but this is not always done.

Privatisation
The capital provided by the private sector will usually be dearer than the government raising it through a bond issue on its own balance sheet. So why might it still be cheaper for service users and better for taxpayers?

1. The private sector may well have better capital discipline, controlling the cost and the time it takes to build new facilities.

2. The private sector may be better at employing people, creating a higher wage higher productivity environment which is also better value for service users.

3. If a mistake is made with an investment private sector shareholders have to meet the losses, not taxpayers.

4. The private sector may innovate and grow the business, finding new revenue streams and activities which supplement the core activity.

What happened as a result of the major privatisations of the 1980s-1990s?

• The privatized railway reversed years of decline in the use of the railway and turned it into a growth business. Labour blamed a couple of bad accidents on privatisation, through the safely record was no worse than BR. They renationalised most of it.

• The electricity industry switched substantially from coal to gas and greatly raised the fuel efficiency of its output, driving prices lower before the Labour government turned it into a heavily regulated and controlled activity.

• The telecoms industry was transformed by competition and private investment, breaking free from the shortages and lack of innovation of the old nationalized industry. The huge growth of the City would not have been possible with monopoly BT rationing service.

• The water industry modernised and spent more money on investment, but gains were limited by the lack of permitted competition.

Could we have more private infrastructure?

1. Telecoms – definitely Yes, and we are

2. Roads – problems with road pricing when the bulk of the system is free and will remain free

3. Railways – lack of investment return without guaranteed subsidy

4. Energy – Yes, but need for regulatory clarity and consistency

Why is so little private infrastructure started when so many say they want to invest?

1. Slow pace of planning and licences for large projects

2. Uncertainty over what an infrastructure investment looks like

3. Arguments over how much risk the private sector can and should take

What other forms of partnership make sense?

1. Design, build, operate schemes

2. Contracted out services

3. Provision of specialist services by private sector for public

4. General supply

How far should general supply go? The case of medicines

1. Research and development of new treatments

2. Manufacture of the drug

3. Supply to NHS central warehouse

4. Supply to ward or surgery just in time

5. Supply direct to out patient

6. Role in repeat prescription whilst preserving control of Dr

The world of the internet

Now the public sector is so reliant on private sector internet technology, service provision and date storage what does this do to the definition of public service and to the role of the public sector official?

1. Data generation

2. Data storage

3. Data processing

4. Data use

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

57 Comments

  1. Nig l
    Posted April 28, 2018 at 6:02 am | Permalink

    As ever a well thought out, well researched piece of work, I realise you will have elaborated on the statements made in the slides. You set out the big issues, logically breakdown and sequence the public sector, privatisation etc, but why no efficiency figures etc and did you do not draw it all together at the end, summarising your conclusions, that would obviously be based on your personal philosophy but also extensive knowledge?

    It seems a lost opportunity to send a clear message to the government about a direction they should be taking and why, and they certainly need it.

    Reply I will do so in a later blog. This is the analysis before prescription

    • L Jones
      Posted April 28, 2018 at 4:45 pm | Permalink

      A very interesting and thought-provoking reply. I do wish you were the Chancellor, Dr R!

  2. Lifelogic.
    Posted April 28, 2018 at 6:14 am | Permalink

    Well the roads are not free – we pay fuel duty, car tax, tolls and congestion charges. We also incur costs through the dreadful congestion caused by lack of roadspace and mismanagement. It would be better and far more efficient to charge electronically per mile with variable rates higher at peak times. That way the right people pay and the incentives for better and new road space are there.

    Free at the point of use is bad for roads, just as it is in the dire NHS and other areas.

    The slow pace of planning – breathtakingly slow and absurdly expensive. Many layers, legal challenges, political fudges and lies. Full of parasitic people earning a good living by damaging the economy and delaying progress wherever they can. Still nothing on Heathrow or Gatwick we need both and need them both now. Where is some proper decisive leadership for once. Some political courage, rather than lies, deceit, dithering and endless fence sitting? Yet when they do decide HS2, Hinckley C, for example they choose totally the wrong projects. Both are idiotic in cost benefit, environmental and political terms.

    • Lifelogic
      Posted April 28, 2018 at 1:57 pm | Permalink

      Perhaps a more urgent topic for discussion (given the state we are in under Hammond and May) should be:-

      What use is the public sector to the private sector?

      After all they spend (and largely waste) nearly 50% of GDP and what do we actually get for all this tax and tax complexity. Nothing much of real value or quality. On top of the tax we are forced to use expensive energy plus endlessly inconvenienced by daft regulations, daft planning restriction and endless interference (usually for people who could not run a whelk stall).

      In effect yet another tax that damages productivity and our ability to compete, yet raises no tax for government – quite the reverse in fact.

  3. Lifelogic.
    Posted April 28, 2018 at 6:25 am | Permalink

    Slow growth is seems. Amazing we have any growth at all with the highest taxes and tax complexity for 40 years, over regulation everywhere, suffocating government and zero vision form socialist dopes May and Hammond. Especially with the threat of Corbyn in the wings. Perhaps the companies were distracted from productive activity by May’s gender pay gap reporting nonsense, the enforced work places pension, the attacks on personal service companies and the self employed rules, the minimum wage increases, the absurd planning system, tax system and all the rest of the time wasting drivel we get from government …….

    A down turn on construction and the propert sector particularly it seems. Well what did Hammond expect with 15% stamp duty, double taxation of landlord interest, bank lending restrictions and rip off bank margins and fees and the likes?

    • Lifelogic.
      Posted April 28, 2018 at 6:26 am | Permalink

      Plus the absurd new apprentice levy tax.

      • Fedupsoutherner
        Posted April 29, 2018 at 7:06 am | Permalink

        Talking about apprenticeships. A friend of ours has completed two years training to become an electrician with one of the big national companies. He needs to complete a third but apparently due to costs, and as I understand it, because the company won’t find the third year cost effective to them, he has been dropped from the course and is now moving furniture instead, unable to become a fully qualified electrician.

  4. Mark B
    Posted April 28, 2018 at 6:39 am | Permalink

    Good morning

    What needs to be ascertained before any policy is implemented, is there likely to be a better outcome for the end user ?

    Whilst I am generally supportive of privatisation, having some knowledge of just how badly run some of even the most efficient councils are run, I do not believe all services would be better run by the private sector. One area of concern has to be that of competition. If there is no competition then the provider, irrespective of form of ownership, has no incentive to supply the best service for the best price

    • getahead
      Posted April 28, 2018 at 4:15 pm | Permalink

      Mark, doesn’t privatisation mean that competition is more likely?

      • Mark B
        Posted April 28, 2018 at 8:16 pm | Permalink

        Not always. Look at water or the railways.

      • hefner
        Posted April 28, 2018 at 9:21 pm | Permalink

        Not always if the private company is in a position of quasi- or real monopoly in the activity or geographic sector, e.g. most water companies.

    • libertarian
      Posted April 29, 2018 at 9:19 am | Permalink

      Mark B

      Good post

      getahead

      No, because most privatised services are still monopolies for the duration of the contract

      My take on this is that we dont need too privatise more, we need to scrap more, there are vast numbers of public organisations, “schemes”, “initiatives” , public bodies that consume billions of taxpayers pounds, achieve little and for the most part are completely unneeded and ineffective.

      Just one example

      I chaired a conference last week at which there were 4 ( yes 4 ) seperate government funded organisations talking about the work they do to help young people locally into work. None of them had heard of or supported the local business group that has done this work FOR FREE for the last 6 years and who have been achieving successful results. Meanwhile the 4 public sector organisations admitted they hadn’t actually delivered anything to young people yet as they were still working on the “framework”, terms of reference and engaging “stakeholders” although it doesn’t appear that they felt local employers were stakeholders in the employment market. This is one example of the vast amount of unnecessary waste of taxpayers money.

      Imagine what we could achieve if we reduced business taxes and spent most of the tax raised on the core services of government , justice, security, health , transport and education.

      PS Please scrap the depart for Business…. totally pointless

      • a-tracy
        Posted April 30, 2018 at 2:14 pm | Permalink

        This is typical sadly Libertarian, no help or encouragement for trainees into small businesses and traditionally it is small businesses that trained them and helped them to grow into promotable employees.

  5. Epíkouros
    Posted April 28, 2018 at 6:44 am | Permalink

    Starting from the premise that government is not a benefit but a very costly, wasteful, corrupt and inefficient anti democratic institution then your analysis on how private and public bodies interact is a wasted exercise. Wasted because most of what you say currently about the current and future position vis-a-vis the public and private sector is irrelevant as most public sector bodies and government apparatuses should be scrapped. Apart from the armed forces, foreign relations and a few other non intrusive functions there is no need for public sector bodies, quangos or legislature or a state executive. It is demonstrable that society functions far better without them as they are an encumbrance and an obstacle to the efficient imposition of economic, judicial and social order not an aid. It can rightly be said that government is not the solution to problems but generally the cause of them.

    • acorn
      Posted April 28, 2018 at 10:41 am | Permalink

      Thomas Hobbes (1588-1679), the influential English political philosopher, claimed that the human condition without a government capable of enforcing peace and stability, and able to protect citizens from both internal and external threats to their well-being would be a perpetual “war of all against all”. In such a condition, life would be “solitary, poor, nasty, brutish and short”.

      It can be inferred from his political thought, that any functioning government would be preferable to the conditions which would prevail without a government. Hobbes has civil war in mind, specifically, when he thinks of the worst situations possible without intact government. He would point to the break-up of the former Yugoslavia or to the chaos in Iraq currently, as examples of the conditions which would prevail without government. (David T. Risser, Professor emeritus, Millersville University of Pennsylvania)

      • Epíkouros
        Posted April 29, 2018 at 8:07 am | Permalink

        I am not calling for the abolishing of government it does have its uses as a facilitator and a lawmaker but only doing so with restraint and in keeping us secure from ourselves and from external forces. However what I am calling for is a lot less of it and it should cease providing, funding, interfering and manipulating. No public sector and most of policing done by the private sector for example. I could go into a multipage diatribe on the subject but suffice to state here that I would use as a basis for government reform classical liberal values. Not liberal values that we have today which is authoritarian/Orwellian in nature and which we often label as progressive. Progressive it is not it is taking us to a type of dark age.

      • libertarian
        Posted April 29, 2018 at 9:22 am | Permalink

        acorn

        I seem to think its states and governments that start wars

        • libertarian
          Posted April 29, 2018 at 2:01 pm | Permalink

          oh and acorn

          It was governments who murdered nearly 100 million of their own citizens in the 20th century. Nah lets have just a very small state to enact the will, safety and security of the people and leave it at that.

  6. Lifelogic.
    Posted April 28, 2018 at 6:54 am | Permalink

    Charles Moore is sound today on the total incompetence of government and civil servants over Windrush:-

    “Mrs May was the first prominent Conservative to call her party “nasty” (she is hostile even to her own). Yet no one could accuse her, as its leader, of having made it nicer.”

    As it’s leader or indeed as a long serving Home Secretary, she has done the complete opposite in my personal opinion. By trying to get immigration down while still having an open door to all in the EU you get this lunacy. Can we have a sensible points based system same rules for all and not a racist system.

    I also see that Lord Justice Singh and Mr Justice Whipple ruled that treating people equally regardless of their religion or lack of religion is incompatible with the “Equality Act” and articles nine and 14 of the “Human Rights Act”. Coronors need to discriminate against atheists and some religions and prioritise others over them it seem! All humans are equal but some (holding particular irrational belief systems) are more equal than others it seems. An interesting view of the equality act. Rather like gender and the Cambridge Maths Tripos admissions.

    • Sir Joe Soap
      Posted April 28, 2018 at 8:09 am | Permalink

      Even better and more significant was the preceding para, which should be her Prime Ministerial epitaph:

      “It was not unreasonable of Mrs May to create a “hostile environment for illegal immigration” (that key word “illegal” is usually left out by her critics), but the phrase sticks, because it fits her style of politics so well. Her environment is hostile to talented individuals who pose a threat to her, to courses of action that are bold, and above all to ideas that are new and interesting. She is hostile, in her rhetoric, to freedom, opportunity, markets, businessmen, immigrants. It was she, many years ago, who was the first prominent Conservative to call her party “nasty” (she is hostile even to her own). Yet no one could accuse her, as its leader, of having made it nicer.”

      • Lifelogic.
        Posted April 29, 2018 at 6:09 am | Permalink

        Indeed.

    • Sir Joe Soap
      Posted April 28, 2018 at 8:16 am | Permalink

      Indeed, were this ruling to be followed you could be above ground in perpetuity, always put behind in the queue, Mr LL!

    • Woody
      Posted April 28, 2018 at 8:19 am | Permalink

      And in comparison, a certain opposition leader stated that he would be focused on kinder political debate treating people with respect .. and then he doesn’t.

    • sm
      Posted April 28, 2018 at 6:11 pm | Permalink

      Oh for heavens’ sake, I’m no fan of the PM, but I was in the conference hall and only a few feet away from her, when as Party Chairman she pointed out that OTHER PEOPLE called the Conservatives the Nasty Party.

      She did not – repeat NOT – call her Party ‘nasty’. Furthermore, it was a very necessary wake-up call, in my opinion.

      • APL
        Posted April 29, 2018 at 7:46 pm | Permalink

        sm: “She did not – repeat NOT – call her Party ‘nasty’.”

        So, it was the BBC with selective editing ?

        Not in the least surprised to hear that.

        But why haven’t the Tories done something about the BBC?

  7. oldtimer
    Posted April 28, 2018 at 6:55 am | Permalink

    It seems to me that the key question is what are the core functions of the state over which it should exercise direct control? I do not have ready answers but national security ( borders, defence), and the rule of law should surely lie at the heart of the state together with the power to collect and distribute taxes. Beyond that there is a case to be made that the state should make provision through regulation of activities like rubbish collection, for example, where some individuals would not otherwise pay their share to keep streets clean.

    Looked at in it this way, I suspect there are many activities (where personal choice or circumstances apply) where it should be feasible to provide services through a competitive market rather than through monopolies.

    Politics will prevent anything like this actually happening, but it it is worth asking the question: why is the state involved at all?

    • Lifelogic
      Posted April 28, 2018 at 8:16 am | Permalink

      Indeed the state should restrict itself to the very few things it really can do better than individuals and the private sector. Defence, property rights, law and order with some real deterrents, basic infrastructure, some inoculations perhaps – if they can do these few things competently for once let them extend a little to one or two other areas. 20% of GDP is more than enough for them. It would however be 20% of a GDP that would be about double the current GDP!

      • Peter Parsons
        Posted April 30, 2018 at 11:49 am | Permalink

        So what is “basic infrastructure”?

        Is it roads? rail? airports? sea ports? gas? electricity? water? broadband (given the modern economy and the move towards online first in all things)? All of these plus others?

    • Derek Henry
      Posted April 28, 2018 at 2:10 pm | Permalink

      The state is the monopoly issuer of the Currency without it the private sector would collapse.

      You saw that first hand in 2007

      Even when commercial banks provide loans. Who is that provides the reserves if the banks are short ?

      • Edward2
        Posted April 28, 2018 at 8:16 pm | Permalink

        It is the Bank of England that does that.
        And they are independent of the State.

      • Lifelogic.
        Posted April 29, 2018 at 6:12 am | Permalink

        You have that back to front. The problem only arises due to it having a monopoly. Look at the history of currencies and banking.

      • libertarian
        Posted April 29, 2018 at 2:08 pm | Permalink

        Derek Henry

        The Bank of England is the lender of last resort. In the 2007 crash Brown & Darling stopped the BoE proping up NR to the tune of £90 m , I wonder what happened next ….oh thats right Brown gave them £280 m

        Just so you know theres also an unwritten rule that the other banks step in and support a failing bank. They tried to do this in the crash of 2007 and again Brown stopped it.

        Oh and no wonder you’re a remainer you are totally ignorant of the monetary system we have. The private sector in fact also creates money go and google 400 years of Fractional Reserve Banking

        Not only won’t the private sector collapse if the government didn’t issue notes, it would actually thrive. Go and google blockchain, cryptocurrencies or even luncheon vouchers. Its perfectly easy to organise currency systems without government

  8. agricola
    Posted April 28, 2018 at 7:33 am | Permalink

    The fundamental question is, can the public sector manage a contract to obtain value for money on behalf of the public. Experience suggests they cannot, end of story.

    The big question today is, who is running the Brexit negotiation. Is it David Davis who to date has done tolerably well in preserving our interests, or is it Olly Robbins, and one is entitled to ask who is Olly Robbins. By all accounts an arch remainer civil servant within 10 Downing Street who acts as the PM’s close confidant on the subject of Brexit. We know the PM is a remainer, who it appears has not suffered any life changing experience on the road to Damascus. What is an unelected civil servant doing anywhere near the handles of power.

    If the balance of power does not revert to David Davis very quickly, and he resigns, then this must lead to a vote of no confidence in the PM and her replacement with someone who can be trusted with the will of the people. Obscure civil servants, who try to thwart the will of the people should not be allowed anywhere near these Brexit negotiations.

  9. Lahdedah
    Posted April 28, 2018 at 7:53 am | Permalink

    what’s more to say?

  10. Sir Joe Soap
    Posted April 28, 2018 at 8:12 am | Permalink

    A refreshing technical diversion from the brutal battles for our Country from the hands of Remainers in your own party and outside it.

  11. Ron Olden
    Posted April 28, 2018 at 9:00 am | Permalink

    The BBC doesn’t charge the ‘end user’.

    It charges us a Poll Tax for receiving broadcast TV, regardless of whether we watch the BBC (or S4C, which the BBC also pays for in Wales).

    They use some of our money to give free radio, and internet services, to people, who don’t pay anything, and give BBC TV Signals, and even a dedicated TV Channel to people living outside the UK TV Licencing jurisdiction.

    In any case, the issue isn’t ‘Public Sector’ v ‘Private Sector’. The issue is ‘monopoly’ and ‘regulated contractor’ v ‘competition’.

    If something is heavily regulated and entry in to its’ ranks restricted to those the state approves of (e.g. the Legal Profession and umpteen other things), it doesn’t matter if the provider is ‘private’. The provider is still effectively an unaccountable contractor to the state.

    The only difference between what we usually call the ‘public sector’ and ‘privately’, run regulated monopolies in that the former are run for the benefit of its’ employees, contractors, and political activists, and the latter for the benefit of its’ shareholders and senior management.

    The customers don’t get look in.

    Has anyone, for example, noticed the appalling prices that solicitors charge for the most trivial of duties, and how terrible the NHS is, whilst, in comparison, how excellent our supermarkets are?

    I wonder why that is? Could it be that they have to compete for customers?

    • Mark B
      Posted April 29, 2018 at 8:42 am | Permalink

      In any case, the issue isn’t ‘Public Sector’ v ‘Private Sector’. The issue is ‘monopoly’ and ‘regulated contractor’ v ‘competition’.In any case, the issue isn’t ‘Public Sector’ v ‘Private Sector’. The issue is ‘monopoly’ and ‘regulated contractor’ v ‘competition’.

      Exactly !

  12. alan jutson
    Posted April 28, 2018 at 9:44 am | Permalink

    No problem with either Public or Private run businesses, or indeed a mix of both.
    The most important issue is however efficient management which produces cost effective results and services that satisfies the customers needs.

    Far to often we see Public services privatised in some way, or by percentage, but nothing actually changes, then we seem to get the worst of both Worlds with increasing cost and expenses, less efficiently, and poor customer service.

  13. BOF
    Posted April 28, 2018 at 10:01 am | Permalink

    In respect of the primary question, I believe the state should have as little involvement as possible apart from protecting the public from illegality and abuse. The state should ensure that sectors are open to the widest competition which encourages efficiency and holds down prices. The national interest and national security should always be protected.

    Currently, membership of the EU provides mountains of legislation that favours multi nationals over SME’s. A good reason to scrap the bogus ‘implementation period’.

  14. a-tracy
    Posted April 28, 2018 at 10:09 am | Permalink

    Road use is not free, are you forgetting the taxes on every litre of fuel, the VED tax receipts, Licence costs, the roads are only free for visitors that don’t refuel in the uk and they should be charged the road tax element of the fuel charge in the uk on the fuel they used calculated as they get on and off the ferries. If these taxes were ring fenced for roads I’m sure there would be enough money from it to contract out miles of roads to be fixed to the private sector and take it away from local councils who are doing a terrible job at the moment in many areas with damage to people’s cars they just won’t compensate for. At least with a private company the public could force you to sack them and get another provider, they would innovate better instead of just sticking to things that aren’t working.

    Our free at the point of use health service, if you can’t get a necessary check up at your local hospital within a month you should be given a voucher to take your business elsewhere.

  15. Jiminyjim
    Posted April 28, 2018 at 12:00 pm | Permalink

    I’m always concerned when the main driver of privatisation is getting investment off the public Balance Sheet. Is there a case for public accounting to become more like commercial accounting, ie for genuine public investment to be capitalised and written off over a sensible period? Or is there a sound reason for all public expenditure regardless of type to be written off as incurred?
    If public investment could be amortised, then competition could be restricted to genuine like for like cases where the private sector can be shown to be able to do the job more efficiently

  16. Denis Cooper
    Posted April 28, 2018 at 12:38 pm | Permalink

    Also off-topic, before Theresa May forces David Davis to resign:

    https://www.express.co.uk/news/politics/952306/brexit-news-eu-uk-david-davis-resign-quit-britain-remain-customs-union

    she might like to skim this EU document:

    https://ec.europa.eu/taxation_customs/sites/taxation/files/transit_manual_en.pdf

    “Transit Manual”

    which may contain clues as to better ways in which certain technical customs problems could be addressed, ways which have been developed in Europe since 1949:

    “In 1949 the first TIR Agreement was drawn up. As a result of this Agreement a guarantee system was introduced in a number of European countries which would cover the duties and other charges at risk on goods moving in Europe, in the course of international trade. The success of the 1949 TIR Agreement led to the creation in 1959 of the TIR Convention. The Convention was revised in 1975 and currently has 69 Contracting Parties (February 2016).

    I’m getting fed up to the back teeth with unelected civil servants working to frustrate the will of the people as directly expressed in the referendum. They should each of them be required to solemnly swear allegiance to the UK and abjure all allegiance to the EU, and those who could not bring themselves to do that should be given their notice.

  17. GilesB
    Posted April 28, 2018 at 1:24 pm | Permalink

    State aid is a vital tool to smooth transformation.

    Condemning whole steel towns to unemployment to save a few pounds per ton makes absolutely no economic sense. Steelworkers do not become graphic designers. Moving elsewhere abandons valuable assets in houses and schools etc., which would need to be replaced elsewhere.

    Proper accounting and economic analysis would show that the assumptions of the theory of comparative advantage never hold in practice.

    To say nothing of the loss of human dignity and the destruction of communities.

    Whether public or private, public funds should be invested to smooth transformations. And those who benefit from the changes should be made to bear the FULL cost including all the externalities.

    • Mark B
      Posted April 29, 2018 at 8:53 am | Permalink

      Certain industries are strategic industries and should be not allowed to be part or wholly foreign owned and, some subsidies to a degree. But what and how, especially whilst in the EU the UK is restricted in this practice. Also, what industries ? No industry must be seen as some sort of sacred cow less the government and the taxpayer be held to ransom – eg car workers of the 60’s, 70’s and 80’s.

    • libertarian
      Posted April 29, 2018 at 2:19 pm | Permalink

      Giles B

      You are totally and utterly wrong

      Innovation and new industries and the collapse of old redundent industries and comparative advantage have worked incredibly well

      At its height the combined coal and steel industries employed 400,000 people in the UK

      The digital industries now employ 1.56 million people and growing at 32% a year . Oh and the range of unskilled, semi skilled and professional jobs in those industries is far larger that the jobs in coal and steel ever were . We are growing small firms at an accelerating rate , no longer are people so dependent on one employer in a town or location. There are 5.8 million firms in the UK , and the highest employment we’ve ever had and there are 810,000 unfilled jobs currently

  18. Derek Henry
    Posted April 28, 2018 at 2:06 pm | Permalink

    Many critics from the left and the right do not have the courage to come out and say they prefer the alternative to a Job Guarantee, which is entrenched unemployment and underemployment created by the private sector as it evolves.

    They always prefer a fantasy made up NAIRU number on the back of a fag packet to keep a long line of entrenched unemployed and underemployed in the country.

    They need to keep X number of people unemployed and underemployed to keep inflation down.

    ‘no matter how much I cut off it’s still too short’…

    That’s their golden ticket to growth. Without actually putting a cost on that decision in real terms which is a hell of lot mor expensive in lost output than a job guarentee ever would be. Not to mention the social and physical harm it causes.

    Cowards the lot of them. It is time they started telling the truth about how monetary system operates in reality. The world would be a better place.

    It may take two months to get an answer to a letter from a government department, but it takes twenty years for an industry under private enterprise to readjust itself to a collapse in aggregate demand.

    • Edward2
      Posted April 28, 2018 at 8:21 pm | Permalink

      How can any employer guarantee jobs for life?
      The best an evolving economy can do is to create loads of new jobs in new industries.

    • libertarian
      Posted April 29, 2018 at 2:30 pm | Permalink

      Derek Henry

      Complete and utter drivel. You are totally ignorant of the jobs market

      There are 5.8 million firms in the UK 99.7% of them employ less than 200 people

      We have the highest rate of employment we’ve ever had 32 million the lowest unemployment rate since 1975 4.2% There are 1.4 million unemployed of which 600,000 are considered long term unemployed ( i.e. out of work longer than 6 months) There are currently 810,000 unfilled full time jobs

      Every business support group, every business conference and every survey undertaken reports the single biggest issue facing business is the lack of skilled staff. I’ve just completed a survey indicating that as many as 980,000 more jobs will be created in the next 18 months.

      Your last statement about private companies taking 20 years to adjust is laughable if they haven’t adjusted within a couple they will disappear. You live in a fantasy world. In the last 20 years we’ve gone from inventing a whole new industry to the employment of 1.56 million in it , that industry is entirely private sector. Oh and also not one of the leading companies in it is from the EU 27 …..

      • Edward2
        Posted April 29, 2018 at 4:08 pm | Permalink

        Well said yet again Libertarian.
        I see so many new thriving dynamics small companies on my travels.
        All busy profitable and expanding.

  19. getahead
    Posted April 28, 2018 at 4:11 pm | Permalink

    “what does this do ….. to the role of the public sector official?”
    It makes them redundant. Sack the taxpayer-parasitic, overpaid lot of them.

  20. English Pensioner
    Posted April 28, 2018 at 6:02 pm | Permalink

    I’m of the view that the civil service suffers from a lack of suitable people who are capable of negotiating equitable commercial contracts with the private sector and insufficient people with the necessary expertise to oversee such contracts. Computer contracts seem to be a typical example; have any been a success? They acknowledge they don’t have the experience by calling in consultants and the consultants write the specifications “gilding the lily” at every stage. They supervise the placing of any contracts and oversee the contracts getting paid according to the contract value. But some how they seem to wriggle out of any responsibility when something goes wrong.

    The state also seems to prefer giving contracts to large companies such as Carillion when often it is totally unnecessary. Just look at the diversity of the contracts from school meals to hospital window cleaning. I suspect a local window cleaning company wouldn’t even have been tendered for the job. Why should the state lose out when Carillion collapsed? At least if it had been a number of smaller companies involved they wouldn’t have all failed simultaneously.

    If the state wishes to place work with the private sector it needs its own staff with experience of contract negotiation and engineers, etc, who are competent prepare specifications and to check they are being met by the contractor.

  21. Iain Gill
    Posted April 29, 2018 at 3:45 am | Permalink

    The main thing needed is to hand buying power and decision making over to individual citizens wherever possible. It is the virtuous circle of good providers winning more customers, and the money following success that we need.

    It is take it or leave it, mandarin controlled, end customer has no choice, rationing and allocation that we need to get away from.

    Who owns the providers matters less m

  22. Peter D Gardner
    Posted April 29, 2018 at 7:05 am | Permalink

    Surely the Big Issue is not what role the Government sees for the private sector but what role must be fulfilled by government for the private sector?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page